Mr. Webb: I beg to move amendment No. 63, in, page 1, line 7, at end insert—
'(1A) The child tax credit shall be a family benefit for the purposes of Council Regulation (EEC) No. 1408/71.'.
I hope that the brief amendment will not detain the Committee long. We must consider the status of the tax credits in the Bill under existing domestic law and European law. European law makes provision for a category of benefits known as family benefits to be treated in a particular way for people who work in one country and have children in another.
The critical element is the European Community regulation 1408/71, as I am sure the Committee will know. The two issues are whether the person comes within its scope, and whether the benefit comes within its scope. A person is covered by the regulation if he is liable to pay social insurance in one or more member states of the European Union and has exercised free movement. We are, therefore, discussing people who move to obtain work in the EU. They may be covered by the provisions if the regulation classifies the benefit as a family benefit. Clearly, the family credit used to be treated in such a way, as did the working families tax credit, which was a renaming of the family credit. That has now been split into an adult part and a child part, and the amendment is designed to make it clear whether the child part, at least, will be categorised as a
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family benefit. We believe, and consistency demands, that it should. I hope that the Minister will accept the amendment.
Mr. Flight: The Conservatives have raised the same issue in subsequent amendments that relate to the EU. Clarity is needed both in regard to EU nationals and, possibly, Commonwealth nationals who may be resident here, on which clause 51 touches. What is the Government's policy?
Dawn Primarolo: This is a very specific amendment, which I shall treat as a probing amendment. I can answer the hon. Gentleman's question, but it is not necessary for the Bill to be amended, because the provision exists anyway. The amendment is not appropriate, and if the hon. Member for Northavon were to press it to a Division, I would have to ask the Committee to oppose it.
Such provisions do not need to be included in a Bill. The European regulation to which the hon. Member for Northavon refers is, rightly, directly applicable, and it is not necessary to transpose the provisions in that regulation into domestic law. It would be much better, and it would make for a better Bill, if the hon. Member for Northavon were to withdraw his amendment.
The hon. Member for Northavon asks for clarification about how European social security law within the regulation will treat the new tax credits. A small caveat is necessary. The field is complex and evolving, and the precise treatment of the tax credits under European law may depend on some of the detailed aspects in the final design, which we are considering carefully. Our provisional view is that, as the hon. Member for Northavon said, family credit, and working families tax credit, was, like child benefit, considered to be a family benefit under the regulations. We therefore believe that the child tax credit will fall within the family benefit.
We believe that the working tax credit will fall outside the scope of the main co-ordinating instrument to which the hon. Member for Northavon referred in European law. As we conclude the Bill, we shall be able to take a view on that. However, that is our provisional view, and that will happen automatically. That implies treatments under European law, which I shall not discuss now, as later amendments relate to those issues.
I hope that my explanation has been clear and that the hon. Member for Northavon will agree that the amendment is unnecessary. It is clear and on the record which credits, under the regulations to which he refers, will be designated a family benefit and why the working tax credit would not.
Mr. Webb: I am grateful to the Minister for the constructive way in which she has begun, which I am sure will continue, and for placing on record the Government's provisional view that the child tax credit element will be regarded as a family benefit, subject to the fine print and details. Having received
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that assurance, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Flight: I beg to move amendment No. 1, in page 1, line 15, leave out paragraph (d).
The Chairman: With this it will be convenient to take amendment No. 2, in page 1, line 20, leave out paragraph (e).
Mr. Flight: Clause 1 brings to an end three benefits that are not work related. It is our understanding that the working tax credits are intended to focus on work circumstances and people in work, thereby, in the main, leaving the Department for Work and Pensions to administer benefits for those not in work. In principle, it is not sensible that certain benefits that are not related to work should be administered by the Inland Revenue, rather than by the DWP, which will be administering other benefits for those not in work.
This is a probing amendment. We wish the Government to explain why this policy is being pursued. We are concerned because the working tax credits are to be delivered through bank accounts, and that will depend on the universal bank being fully operative by April 2003, which looks a little doubtful. People who are not in work are most in need of benefits, and therefore it is important that there should not be any problems with the delivery of these benefits.
In some regards, amendment No. 49, which has been tabled by the Liberal Democrats, addresses the same issue as I am raising. I want the Minister to explain what will replace these benefits, and to state whether it is Government policy to end them.
The amendment pertains to that point because the benefits covered by clause 1(3)(e) are the extra non-means-tested benefits for children that accompany incapacity benefit, invalid care allowance, severe disablement allowance and widowed mothers and parents allowance, and which amount, at present, to £11.35 per week. The clause does not make it clear whether the new arrangements are going to replace those benefits, and if that is to be the case, whether they will do so in whole or in part. Can the Government confirm that nobody will be worse off? There are 630,000 recipients of those benefits, and I have received information from the Library that suggests that about 150,000 of them will lose their £11.35 per week. If that is the case, the Government's consultation document might have stated more openly that this was their policy and intent.
I wish the Minister to confirm that I have correctly understood that, and to explain what—if anything—will replace those extra non-means-tested benefits. I understand that, technically, people will not be able to claim child dependency increases if the Bill is enacted. It will not have a financial impact on someone whose income is sufficiently low to qualify for means-tested benefits, but 150,000 people whose income is not sufficiently low will lose out.
Mr. Webb: When I first read amendment No. 1, I could not see the point of it. The Bill is intended to sweep away existing systems of support for children and to roll them into an integrated system—which is
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why we did not oppose it on Second Reading. Therefore, clause 1(3)(d) is essential; it is designed to get rid of the separate systems, and to roll them into one.
I do not support amendment No. 1 for that reason, but I agree with the hon. Gentleman's suggestion that it should be viewed as a probing amendment to explore what the Government have in mind with regard to the transition.
At present, someone who receives a contributory benefit that is in excess of the adult rates of income support but less than the combined adult and children rate would receive income support to bring them up to the poverty line. Once the adult and children elements are separated, someone whose contributory benefit is in excess of the adult element will not receive any income support, but they will receive some payment of child tax credit.
The Committee will want to know how procedures such as passporting will operate under that sort of arrangement. Income support is a passport to 100 per cent. housing benefit. If someone has a contributory benefit that takes them out of income support under the split system, will they still receive 100 per cent. housing benefit? If that will be the case, how will that operate? That is not clear. Similar questions arise with, for example, passports to free school meals. Therefore, as the hon. Member for Arundel and South Downs has suggested, amendment No. 1 should be viewed as a probing amendment that gives the Committee a chance to raise such questions.
Amendment No. 2 should be viewed differently from that. It addresses the transition for people who are currently receiving the benefits that are referred to in subsection (3)(e). There is also an issue surrounding whether new claimants should receive those benefits. A typical case might be someone on incapacity benefit, who is receiving contributory benefit above basic adult means-tested benefit rates, and therefore would not move over to integrated benefits in full, but would get a partial, or, potentially, a nil rate of child credit. The total amount of support going to those families would therefore fall, or would be lower than it would have been without this element of the Bill. Given the Government's proper objective of halving then abolishing child poverty, people on relatively modest incomes will lose out from clause 1(3)(e). People on incapacity benefit, sick people, widowed mothers and others will be made worse off by the provision. That seems to go against the Government's stated aim of reducing child poverty. Those people will not necessarily be fully compensated through integrated benefits, which is why the Conservative party and the TUC—strange bedfellows—were concerned about the measure.